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Chapter 17 Activity-Based Costing and Analysis
Quick Check—Chapter 17
QC1
17-1. Which method of cost assignment requires more than one overhead rate? (a) Plantwide
overhead rate method, (b) departmental overhead rate method, (c) ABC, or (d ) both
(b) and (c).
17-2. Which method of overhead costing is the most accurate when products use overhead costs
in different proportions? (a) departmental overhead rate method or (b) plantwide overhead
rate method.
17-3. ABC assumes that costs are incurred because of what? (a) management decisions,
(b) activities, or (c) financial transactions.
QC2
17-4. What is a cost driver? Provide an example of a typical cost driver.
17-5. What is an activity driver? Provide an example of a typical activity driver.
17-6. Traditional volume-based costing methods tend to: (a) overstate the cost of low-volume
products, (b) overstate the cost of high-volume products, or (c) both (a) and (b).
QC3
17-7. What are three advantages of ABC over traditional volume-based allocation methods?
17-8. What is the main advantage of traditional volume-based allocation methods compared
to activity-based costing? How should a manager decide which method to use?
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Chapter 17 Activity-Based Costing and Analysis
Guidance Answers to Quick Checks—Chapter 17
17-1.
17-2.
17-3.
17-4.
d
a
b
A cost driver is an activity that causes costs to be incurred.
Setup costs, design modifications, and plant services such
as maintenance and utilities are examples of typical cost
drivers.
17-5. An activity driver is the measurement used for cost drivers. An example is machine hours.
17-6. b
17-7. Three advantages of ABC over traditional methods are:
(a) more accurate product costing; (b) more effective cost
control; and (c) focus on relevant factors for decision
making.
17-8. Traditional volume-based methods are easier and less costly
to implement and maintain. The choice of accounting
method should be made by comparing the costs of alternatives with their benefits.